I have gotten a lot of very nice compliments in the last 24 hours about the first post in this two-part series. I do want to emphasize that a huge portion of the value in that post comes from the great survey work that Casey Green does. All I did was tease out a few implications and make a few new graphs (which, I admit, were very pretty). If you want to see analysis like this continue in future years, then support the Campus Computing Project.

In this next part, we’re going to go “off-road” a little and see what we can figure out in areas where we don’t have quantitative data that is as solid as Casey’s. As I wrote in the previous post in this series, there are roughly 875 WebCT and ANGEL customers who will have to migrate to a new LMS in the next few years, in an environment of strong budget pressures. This creates an atmosphere in which more and different schools may be in play than has typically been the case. But evaluating options and choosing to move are two different things. What happens in the next few years is likely to shape the LMS landscape for years to come, at least in North America.

Let’s see if we can read the tea leaves.

More on Market Share Numbers

One of the (many) reasons that figuring out what’s happening is so hard is that we don’t really have good, granular data on LMS market share by LMS platform, and the data that we do have appears to be contradictory on the surface. The numbers we get from Campus Computing are very good as far as they go, but they break down market share by company rather than by platform. We have no way of knowing from the survey data, for example, how many WebCT Vista customers there are versus Blackboard Learn Basic, etc.. Blackboard used to break out Blackboard Learn Enterprise licenses versus all other LMS licenses in their public reporting, which was better than nothing, but they stopped doing even that much last year.

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On top of that, the aggregate market share numbers we get from Campus Computing seem to be in tension with the customer retention numbers that Blackboard reports. If you strip out the noise from acquisitions, Campus Computing’s survey numbers suggest that Blackboard is losing 6% to 8% organic market share annually. But Blackboard regularly reports customer retention numbers in the 90% to 92% range. Can both of these be right?

Actually, they can. When a company reports customer retention numbers, that’s usually an indication of churn, i.e., how many customers are moving around among the competitors. It matters because there is a cost of sale; every new customer costs money to win over. Therefore, the more customers you hold onto, the fewer new ones you have to recruit to stay even, the more profitable you can be. But Blackboard’s situation may be somewhat different. As far as I can tell, their retention rate reflects not churn, primarily, but almost pure attrition. I am not aware of Blackboard acquiring any new higher education customers for their LMS in North America in recent years, and none of the experts that I asked in preparing to write this blog post were able to cite any either. This doesn’t mean that there haven’t been any, but it suggests that there probably haven’t been many. The company may be picking up a few new customers overseas and a handful of domestic K12 and government/corporate customers, but for the most part, it looks like that 8% to 10% of the LMS customer base lost every year is not being replaced. An 8% to 10% attrition rate at their market share level is roughly compatible with a 6% to 8% loss of overall market share. Furthermore, it’s not entirely clear how Blackboard has been defining retention. If a customer drops a Blackboard-owned LMS but continues to license the Blackboard-owned Xythos content management product, does that customer count as retained? From a cost-of-customer-acquisition perspective, it would be perfectly reasonable for a company to count that customer as retained. But if you’re trying to understand what’s going on in Blackboard’s LMS business, then that sort of accounting wouldn’t tell you a whole lot. More recently, Blackboard management has referred specifically to “revenue retention,” although it’s not entirely clear whether that has always been their definition, nor is it entirely clear how the company derives such a metric. Again, since neither Blackboard nor Campus Computing breaks out customers by the various platforms Blackboard owns (and, in Blackboard’s case, they no longer even consistently break out LMS licenses from other licenses), we don’t have much in the way of hard numbers to help us reconcile these various bits of data and management statements that we’re getting.

At any rate, we have about as good a picture of the recent past as we’re likely to get. There are three questions going forward. First, are the kinds (and sizes) of customers that migrate off of Blackboard going forward different than the kinds of customers who have done so in the past? Second, will the trend away from Blackboard-owned platforms accelerate or decelerate? And finally, will the proportion of departing Blackboard customers going to each platform alternative change going forward?

Kinds of Customers

As I wrote at the top of the post, we’re getting into an area in which we have very little hard data. But from what Blackboard has said on their earnings calls, it appears that the majority of customers they have lost in the past have been WebCT CE and Blackboard Learn Basic customers. By and large, these were low contract value customers. My guess is that they also have tended to be small in terms of student population, but I don’t have the data to prove it. What I do know is that in November of 2007, then-Vice President of Investor Relations Michael Stanton told me that the company may have lost “one or two” Vista customers since WebCT had been acquired in February 2006. Vista was WebCT’s enterprise platform, where it’s larger and higher contract value customers tended to be. And at that point, they were staying.

There are signs that this the state of affairs may be changing, though. Consider:

University of North Carolina, Charlotte (24,700 students) has decided to move from Vista to Moodle in 2011.

North Carolina State University (31,000 students) has also decided to move from Vista to Moodle in 2011.

Wilfred Laurier University (16,000 students) moved from Vista to Desire2Learn last quarter.

University of Minnesota (51,721 students) is moving from Vista to Moodle in 2012.

The Utah Education Network (109,000 college students plus 40,000 K12 students and teachers) is moving from Vista to Instructure Canvas in 2012.

These are just anecdotal, of course, but they raise the possibility of a trend. Particularly important to note is that Vista supports multi-tenant hosting capabilities beyond what Blackboard Learn currently offers. (Learn is reportedly going to come into parity in this regard with version 9.2.) This is particularly important for multi-campus systems or consortia that host their LMS internally. That means these large customers are not likely to have made the move to Blackboard yet. So, for example, UMassOnline (77,108 students), which provides LMS support for distance learning to five University of Massachusetts campuses plus a handful of other colleges throughout the state of Massachusetts, is on Vista (and is in the middle of an LMS platform evaluation process). These multi-campus systems and consortia are the ones to watch very closely.

The ANGEL demographic is somewhat different. Its strengths were in community colleges (13% market share in 2009, according to Campus Computing Project) and private four-year colleges (10.3% market share in 2009). Again, these categories don’t necessarily indicate contract size. For example, the SUNY Learning Network hosts ANGEL centrally for something like two dozen community colleges. And Monroe Community College—a member of the SUNY Learning Network—has about 19,000 students by itself. Miami-Dade College, another ANGEL customer, has about 170,000 students. The other outliers that I know of in terms of large customers (regardless of segmentation) are Penn State, with 87,000 students, and Michigan State University, with 47,278 students. (SUNY and Penn State are both in the process of respectiveLMS reviews; there’s no public data I could find on whether Michigan State or Miami-Dade begun any such evaluation at this time.) But overall, my sense based on anecdotal evidence is that the ANGEL customer base probably doesn’t look very different from the CE customer base, in both campus size and contract value. With a handful of exceptions, ANGEL customer attrition could look a lot like the Blackboard Basic and WebCT CE customer attrition that Blackboard experienced from 2006 to 2010—assuming that they leave in the same proportions.

Numbers of Customers

In addition to the kinds of schools that could potentially migrate, the number of schools that migrate from 2011 to 2014 may be different than from 2006 to 2010. We’re not going to find that out based on the number of forced migration candidates, though. The number of combined WebCT and ANGEL customers that need to migrate in the next four years is roughly equal to the number of WebCT customers that migrated off of the legacy platforms in the last four years so, if everything else holds equal, the rate of attrition shouldn’t change that much. What we don’t know is the degree to which economic pressures combined with the increased perception of viable alternatives in the market—or, for that matter, changes that Blackboard makes such as improving customer service, which has been a big push for them of late under Ray Henderson’s leadership—will change the rate of attrition.

Once again we don’t have hard data and are forced to look for anecdotal evidence for the answer to this question. But one kind of anecdotal evidence that would be particularly potent would be customers that are not on legacy platforms moving away from Blackboard. As far as I can tell, the historic attrition of Blackboard Learn Enterprise customers has been very low. Again, customers don’t tend to move from their LMS unless they feel they are forced to do so. If mainline Blackboard Enterprise customers are moving, it likely means that either the economics are driving them or they have had such catastrophic product or customer service failures that they don’t think they can afford to stay with the vendor.

Are there any data points indicating that that this kind of attrition is happening? Well, there are a couple that I know of:

University of North Carolina Chapel Hill (28.916 students) are moving from Blackboard to Sakai in 2014.

Miami University of Ohio (20,126 students) is moving from Blackboard to Sakai in 2011.

CSU Long Beach is in the process of moving from Blackboard to Desire2Learn over the current academic year.

The tri-college consortium of Bryn Mawr, Haverford College, and Swarthmore (combined student total of about 4,600 students) is moving from Blackboard to Moodle in 2012.

The 14 schools in the Penssylvania State System of Higher Education, or PASSHE (119,513 students) was on a mix of Blackboard, WebCT, and eCollege—but mostly Blackboard—and they recently switched to Desire2Learn. (I’m not certain how many of those Blackboard campuses were on Enterprise, so take this one with a grain of salt.)

This is obviously not enough data to establish a trend. But any defection of a Blackboard Enterprise Learn customer is significant because there is no forced migration and because the barriers to exit are high. To gauge whether there is an acceleration of customer migration starting, I would watch for RFPs coming from Blackboard Learn Enterprise customers, and I would watch schools like Brigham Young (26,928 students), which has been heavily involved with co-designing and piloting Agilix BrainHoney, and Arizona State University’s (70,440 students) deal with Pearson LearningStudio (a.k.a. eCollege). If these schools begin to move to other platforms as their main LMSs, it would be a strong sign that WebCT and ANGEL customers are also likely to move to other platforms in numbers that are higher than in the past.

It’s harder to identify a leading indicator that might suggest the attrition rate is going to be lower. You’d have to monitor school announcements as they come out. If more than 50% of the announcements from WebCT and ANGEL schools are for upgrades to Blackboard Learn Enterprise 9.x, and particularly if the big Vista-using consortia start announcing moves to 9.x in numbers, those would be signs that Blackboard may be lowering attrition rates from their historical norm and holding onto their high-value customers in particular.

In terms of where these customers end up if they leave Blackboard, we have very little data to go on beyond what I covered in my last post. It’s possible that the Vista and ANGEL customers will have different platform preferences than the CE and Blackboard Basic customers have had, so the numbers we have been seeing in terms of relative market share gains among the contenders could change. And, of course, there’s always the possibility of the breakout success of a player other than the big three taking a few percentage points of the market share pie. The 2011 Campus Computing survey will be particularly important to watch, I think, in telling us the degree to which the trends are holding.

The Bottom Line

Here’s what we know about what’s happening in the LMS market, based on the analysis of this post and the previous one:

The data confirm that the LMS market is very much in transition.

Projection of current trends over the next four years suggest a world in 2014 in which at least four platforms have comfortably over 10% market share and no platform dominates all others.

There is no evidence to suggest that open source is either being confined to small overall market share or on its way to dominance of the market in the next four years.

There is some evidence that schools within particular market segments may be predisposed to choose open source, while schools in other market segments may be predisposed to avoid it.

There is good evidence that preferences for particular LMS platforms trend strongly by market segment.

Within those broad outlines, there are a number of uncertainties related to the economy, the largely unknown switching preferences and tendencies of Vista and ANGEL customers, and the actions of the individual LMS vendors and open source projects that could change the trends somewhat from what we’ve seen in the past.

We don’t have any evidence yet to suggest that any such changes are likely to have a very big impact on the overall projections for market share in 2014, although they could have significant impact on individual LMS players where winning or losing a few large deals could have an impact on their businesses, and possibly on the market share numbers within individual market segments.

Anecdotal evidence suggests that there may be room in the market for one or more LMSs outside of the big four to pick up a few points of market share over the next four years.

Given the sunset dates for WebCT and ANGEL products, most schools that are likely to participate in this change wave will start their evaluations within the next 6-18 months. That means the LMS versions that are available in calendar year 2011 are the ones that they will be evaluating, by and large.

Of course, four years is a very long time in the technology world. I expect the context of the market to be very different by 2014. Between movements toward more personal/informal learning environments, the big changes that are happening in the textbook industry as content providers and delivery platform providers collide, and the breathtaking pace of innovation that continues in the consumer web market, I strongly suspect that we’ll see a wave of new software that will begin to displace the classic LMS. My guess is that it will be mostly co-existing with current-generation products over the next few years, but by 2014 we may see it beginning to change the whole picture for educational technology infrastructure in some fundamental ways.

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Reader Interactions

Comments

One aspect I’d be interesting in hearing about is the relationships between the various LMS players and the large educational publishers. Each of these publishers has an LMS platform that they use for hosting online courses and other e-products. Which of these are Blackboard’s platforms, which are others (including open source), and which are home-grown? What portion of the LMS vendors’ revenue comes from these large customers and what would be the effect of them switching?

For example, Pearson’s CourseCompass is built (AFAIK) on Blackboard 6 and, with the large number of students using the Pearson MyLabs and other products on that platform, must account for significant revenue for Bb. With Pearson’s acquisition of eCollege and Fronter and their new push for LearningStudio, what happens to Bb if (or when) Pearson switches CourseCompass to LearningStudio? Similarly, Elsevier Health Sciences uses the ANGEL LMS for its Evolve platform and (again, AFAIK) is one of the largest ANGEL implementations. What happens if Elsevier decides to not renew that contract? Wolters Kluwer chose D2L a few years ago. How big are they for D2L and what would the effect be of switching? I may be wrong, but I think Wiley used to have a Bb-based platform but recently moved to one built around Sakai. How has that affected Blackboard, if at all?
I know the publishers are small in number but I think each hosts a great deal of users on their systems and therefore the license fees must be signicant, far larger than those paid by most educational institutions. I would be interested in hearing your thoughts about this market segment.

Good questions, Anonymous. I don’t have much to add about current licensing by academic publishers beyond what you’ve cited here (although I may try to look into it a bit). But my sense of that market is that it is very fluid at the moment. On the one hand, as academic (particularly textbook) content goes digital, owning the learning platform becomes more critical. So I expect to see significant moves toward owning their own platform (either build or buy) in the academic publisher over the next couple of years. On the other hand, it looks like Blackboard is getting significant revenues not only from licensing their platforms to publishers but also by charging publishers for the right to publish their content into the LMSs of Blackboard’s K20 customers. They’ve done a couple of deals with both textbook publishers and less traditional academic publishers, e.g., NBC.

You see grand tectonic shifts in market share that are in motion and seemingly inevitable. I disagree – I see a market that is shifting from a seller’s market to a buyer’s market. Blackboard, D2L and Sakai will have to deliver more and more and deliver better and better to keep or gain customers. It is now a race and in the next four years there will likely be a clearer winner than now.

It kind of looks like the market has been tweaked as much as it will be tweaked by acquisitions. Those willing to sell have sold. The rest are in it for the long haul. With the acquisition option seemingly off the table – the only other option is to compete based on building the best product.

You seem to feel as though you know at this moment who will win or lose. I feel that the race has just begun and that Blackboard, D2L, and Sakai have an equal shot at winning starting now.

What is absolutely clear to me is that any LMS vendor (Sakai, Moodle, D2L, Blackboard, etc) that sits on their hands for the next four years – will likely end up outside looking in. So it is time for everyone in the marketplace to play strong or go home. An frankly, everyone in the market needs to just get cranking and build the best damn user-centered mousetrap ever seen and stop imagining that unseen forces are inexorably driving the market to one advantage or another.

A bit of clarification on my previous comment – your blog system chopped off the first half so the second half (above) is a little choppy. I won’t rewrite the top half but just summarize it here.

I think that if you re-drew your market share graphs with Moodle stacked on top, you would see that Moodle has real, significant growth, and Sakai and D2L are growing very gently. I think the for schools who decide to switch who are price conscious, Moodle is nearly always be the choice and so Moodle will slowly completely take over the “lower-end” of the market.

But as you also have said previously – that is not where the money is and so even if the number Blackboard clients may have declined, revenues continue strong because the remaining customers (a) buy more, and (b) pay well.

So if we segment the market into the “price conscious” and the “not-so-price conscious”, we end up with two sub-markets, and Sakai, D2L, and Blackboard will fight of the the piece of the market with money to spend.

I am not suggesting Moodle is an inferior product in any way. I just think their market approach is dramatically different than the other three. Moodle has the low-cost / high volume model completely owned and are making good revenue in high volumed volume of low-marginal-revenue customers. The other three are fighting for the “high-cost-per-sale” crowd – and when you win one of those, you make more money per customer.

Great post. i appreciated learning about dominate LMS companies as well as the trends you’ve tracked. Do you have any data about online course LMS systems? Are Sakai and D2L part of the equation in K12 online courses?

Chuck, I don’t think that changing the order that the LMSs appear on the graph would have changed the perception (or the reality) that Moodle is easily the fastest growing LMS in the U.S. higher education market at the moment, while Desire2Learn and Sakai both also have solid but less dramatic growth trajectories.

I do think there is some validity to your point about market segmentation, although I don’t think that price sensitivity captures the whole of it. If you look at the market segmentation graph in the first post, the public and private research universities are the ones that have shown the least growth in non-Blackboard alternatives. Those schools are the ones that are most likely to be on Blackboard Enterprise and thus less likely to be in play, but they are also the ones that are most likely to be on Vista. Public four-year colleges is the third least penetrated category by non-Blackboard LMSs, and I have a feeling that the public four-year colleges (which include big CSU schools like SFSU with over 30,000 students) tend to have a significantly larger average size than the schools in the private four-year college category. While Moodle has been competitive in those top segments, its growth relative to the other options is less impressive. There are multiple factors that probably go into these differences, including perceived scalability of the alternatives, functional differences, price differences, historical accidents about which peers/neighbors went with which platforms early, and so on. At any rate, it is quite possible that, over the next four years, the schools in those segments will break in greater proportions to Sakai and/or Desire2Learn than we have seen in overall market changes in the past four years. It’s also possible that those schools will stay with Blackboard in greater numbers. And finally, it’s possible that Moodle is gaining enough momentum in the overall market that perceptions about the platform being more appropriate for smaller, price-sensitive schools will fade and their rate of growth in those segments will increase over the next few years. That uncertainty is one of the main points of this post. If you ask me how much of a difference that uncertainty can make in changing the 2014 projection from the previous post, I would guess plus or minus four percent for any one platform. That’s a pretty big margin of error. It could even be bigger than that. But not hugely so. I would be very surprised, for example, if any of the platforms was six percent off of those projections. The market isn’t infinitely malleable. Schools are already beginning to evaluate, and they rarely start from a completely neutral, objective perspective. They go in with certain preferences based on the existing reputations of the platforms, of open source versus private source, of what their close peers seem to be doing, and so on.

What the various platform developers do in their respective 2011 releases is important. It will impact the market, possibly enough to really help or hurt particular vendors, or significantly impact the sustainability of small companies or open source communities. But when all is said and done, if you squint when you look at the 2014 projection graph so that the numbers are blurred and all you can see are the rough proportions, I doubt it’s going to look very different than it does now.

Brian, all of these platforms are used in full distance learning (which is what I presume you mean when you refer to “online course LMS systems”), and all of them compete in K12.

Michael – yes – we agree very much.
Perhaps the simplest expression of where my analysis and your analysis differs is that you break the market into two “chunks” in all of your graphs and commentary into “Blackboard” and “Everyone except Blackboard”. I think that in your breakdown you are grouping rather unlike creatures (Moodle, D2L, and Sakai) as if they were a “segment” which I claim are not.

My formulation is that the breakdown is better thought of as “Moodle” and “Everyone except Moodle” and that in many ways the fates of D2L, Blackboard and Sakai are more closely linked than the fates of “Everyone except Blackboard”.

I re-emphasize that this is not intended as criticism of Moodle’s functionality or anything else. Moodle is successful because it is outstanding software that meets the needs of users.

(Here is where I will be badly mis-interpreted) Moodle is fundamentally different than Sakai, D2L, and Blackboard because of its “franchise model” and very low cost of entry. In a sense if these were restaurants or stores, Sakai, D2L, and Blackboard would be steak-houses with mahogany walls or fancy jewelry stores in the mall and Moodle would be Kentucky-Fried-Chicken or Walmart. My metaphor is *not* about features or fitness for purpose – I am talking about the underlying foundational business model and the clash of business models here.

And as you rightfully say, Moodle is patiently waiting right outside in the mall parking lot and making increasing forays into the up-scale segment. Who knows they might even put food-court in the mall and the next thing you know, people are going to the mall for fast food – it is so crazy it might just work…

The reason that the graphs are the way they are has to do with the kind of data that I do and don’t have access to. I would have much preferred a graph that included Blackboard Enterprise, Blackboard Basic, CE, Vista, and ANGEL. But we don’t have market share numbers for Blackboard by platform and, barring that, including them in the graphs creates a lot of noise due to the acquisitions.

I made a conscious decision when writing these posts to stay close to statements that I can back up with data. Part I is all about what the survey data says. Part II is about the kinds and range of uncertainty in using past performance to project future events. We should be getting in data in 2011 and 2012 that will give us clearer indicators of how all this will break. There is a degree to which the trends are likely set and a degree to which the story has yet to be written. I’m trying to clarify how those two parts work in relation to each other rather than making predictions within the bounds of the the part that has yet to be written.

The University System of Georgia has the GeorgiaVIEW (Vista 8) with 292,000 active LMS users (probably around 275,000 students) and 311,000 students is in the process of selecting which LMS we will use. Throw in others in the system who host their own, and we are at about 300,000 higher ed students. Throw in continuing education and we have about 325,000 students in the LMS and probably 360,000 total.

Our selection process web site: http://www.usg.edu/lms Our selection plan is due to the January 2013 end-of-life.

I agree with your sentiments this is a disruptive time where anything could happen.

There’s been a lot of talk and speculation in the last year or so about alternatives to LMS’s, or next-gen LMS’s, that are more open (not in the open source sense, but in two-way connection between students to resources outside of the walled garden of the LMS), personal, and modular. While it’s still early days, I’d be interested in your thoughts about these discussions and the impact they might have on the LMS market moving forward.